Hospitals, GOP Lawmakers Make Backup Plans for ACA Subsidies
Hospitals are working on contingency plans in case the Supreme Court strikes down federal subsidies to help U.S. residents purchase coverage through the federal exchange, Modern Healthcare reports.
The subsidies have been challenged in the Supreme Court case King v. Burwell. At issue in the case is that while the Affordable Care Act says subsidies are available to help certain U.S. residents purchase coverage offered "through an exchange established by the State," a May 2012 IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government.
The high court heard oral arguments in the case on Wednesday and is expected to release a decision by the end of June. If the court strikes down subsidies in the federal exchange, the ruling would eliminate about $28.8 billion in subsidies to 9.3 million individuals in 34 states in 2016, according to an Urban Institute analysis.
The Obama administration has said it does not have a contingency plan in case the subsidies are struck down by the court (California Healthline, 3/5).
According to Modern Healthcare, some of the financial gains hospitals have made under the ACA's coverage expansions could be lost if the high court rules against the subsidies.
Mike Lappin, chief administrative officer at Wisconsin-based Aurora Health Care, said the uncertainty surrounding the ruling "make[s] it difficult for systems just to plan." He said that health systems would likely see a rebound in unpaid medical bills and requests for financial assistance, both of which declined after the ACA's coverage expansions were implemented. In addition, individuals who lose their coverage because the subsidies are struck down could delay care until a medical emergency that warrants hospital care. However, health systems are working to plan for various scenarios that could result from the ruling, including ways to communicate with patients who could lose the subsidies (Evans/Kutscher, Modern Healthcare, 3/5).
States Could Act To Stave Off Subsidy Issues
Meanwhile, states could also act to stave off issues if the subsidies are struck down, the Wall Street Journal reports (Radnofsky/Bravin, Wall Street Journal, 3/5).
During oral arguments in King on Wednesday, Alito said the court could delay its ruling's effective date to the end of the tax year if the subsidies are struck down to allow states to create their own exchanges so that "[g]oing forward, there would be no harm" (California Healthline, 3/5).
According to the Journal, Supreme Court rulings usually take effect within 25 days of the issue date. State officials have said they would not be able to create their own exchanges within that period of time.
However, an extended time period like the one Alito mentioned would give the administration more time to simplify the process through states must go to create their own exchanges. For example, HHS would have to issue updated regulations that change the timeline during which states can apply to create their own exchanges.
Still, states could face challenges finding funding to create the exchanges, according to Ken Choe, a former HHS deputy general counsel and a partner at Hogan Lovells. Further, attempts by the administration to make it easier for them to do so could trigger pushback from federal lawmakers.
In addition, some states likely would remain hostile to developing an exchange (Wall Street Journal, 3/5). For example, Florida and Texas -- which have large numbers of residents who enrolled in health plans through the federal exchange -- have been resistant to creating their own exchange. Meanwhile, other states have proposed laws that would prohibit the creation of or get rid of state exchanges.
Meanwhile, some states that currently rely on the federal exchange -- such as Pennsylvania -- have already taken steps to create their own exchange (Kennedy, AP/Sacramento Bee, 3/5).
Sen. Sasse Unveils ACA Subsidies Backup Plan
In related news, Sen. Ben Sasse (R-Neb.) on Thursday released a plan that would provide subsidies to help U.S. residents purchase coverage through the federal exchange for 18 months if the Supreme Court rules they are illegal, The Hill reports (Ferris, The Hill, 3/5).
Sasse detailed his plan in a National Review opinion piece published Wednesday.
Specifically, the bill -- called the Winding Down Obamacare Act -- would allow for subsidies covering 65% of the cost of plans purchased through the federal exchange for six months. The subsidy percentage would decline over the next 12 months.
In the opinion piece, Sasse wrote that Republican lawmakers will be faced with a "hostage situation" if the high court strikes down the subsidies and the GOP does not have a backup plan. He said that in that case, states would be more prone to accept offers from the administration for assistance from other ACA provisions. He called his plan "a strategic step toward our steadfast goal of fully repealing Obamacare, and beginning immediately to enact longer-term solutions" (Ferris, The Hill, 3/5).
According to the New York Times, Sasse's is the latest in a string of GOP-backed contingency plans that have been unveiled in the past week (Weisman, New York Times, 3/6).
Republican leaders in the Senate on Sunday announced a plan that would protect people affected by a ruling striking down the subsidies by providing temporary financial assistance for those who would lose the subsidies, among other provisions (Ferris, The Hill, 3/1).
In addition, House Republican leaders on Monday outlined a backup plan that would allow affected individuals to continue receiving subsidies in the form of tax credits, among other provisions (Radnofsky, "Washington Wire," Wall Street Journal, 3/3).
According to The Hill, comments from Supreme Court Justice Antonin Scalia during oral arguments on Wednesday encouraged Republicans that they should act if the subsidies are ruled illegal (Sullivan, The Hill, 3/5). During the arguments, Justices Samuel Alito and Scalia both argued that Congress could act to remedy the issue if the subsidies are invalidated (California Healthline, 3/5). Further, Scalia said he believes Congress would take action in such an instance.
Sen. John Barrasso (R-Wyo.), one of the Senate leaders who proposed a backup plan, said the remarks were encouraging "because we are committed to" implementing a contingency plan. Still, Democrats expressed concern that Republican lawmakers would not work to address the potential subsidies issue (Sullivan, The Hill, 3/5).
According to the Times, the plans also come at a time when GOP lawmakers are considering whether to move forward with efforts to repeal the ACA. Senior House Republican aides said Thursday that committee chairs were meeting to decide whether to create a budget plan that would include parliamentary language to repeal the law through a process known as budget reconciliation. House Budget Committee Chair Tom Price (R-Ga.) noted that such language would be broad enough to allow Republicans to use the process for either an ACA repeal or another policy initiative (New York Times, 3/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.